The Investment Plan for Europe: Questions and Answers

Brussels, 20 July 2015

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1.What is the Investment Plan for Europe? Why do we need it?

Since the global economic and financial crisis, the EU has been suffering from low levels of investment. Collective and coordinated efforts at European level are needed to reverse this downward trend and put Europe firmly on the path of economic recovery, which is the top priority of the Juncker Commission. Compared to the 2007 peak, investments have dropped by around 15% in the EU. In the short term, weak investment slows economic recovery. In the longer term, the lack of investment hurts growth and competitiveness. Weak investment in the euro area has a considerable impact on the capital stock, which in turn holds back Europe's growth potential, productivity, employment levels and job creation.

The Investment Plan for Europe has three objectives: removing obstacles to investment by deepening the single market, providing visibility and technical assistance to investment projects and making smarter use of new and existing financial resources. According to European Commission estimates, the Investment Plan has the potential to add €330 to €410 billion to the EU's GDP and create 1 to 1.3 million new jobs in the coming years. There is sufficient liquidity in the EU, but private investors are not investing at the levels needed due to a lack of confidence and uncertainty among other factors, so the Investment Plan for Europe aims to address this. For more information, see this factsheet.

2. What is the European Fund for Strategic Investments (EFSI)? How is it financed? How will it reach the €315 billion target?

The European Fund for Strategic Investments (EFSI) is at the heart of the Investment Plan. EFSI's challenge is to break the vicious circle of under-confidence and under-investment, and to make use of liquidity held by financial institutions, corporations and individuals at a time when public resources are scarce.

EFSI is being set up within the European Investment Bank (EIB). It will mobilise additional investments in the real economy in areas including infrastructure, education, research, innovation, renewable energy and energy efficiency. It will also focus on Small- and Medium- sized Enterprises (SMEs) and mid-caps (companies with between 250 and 3000 employees). EFSI will target projects that will, among other objectives, promote job-creation, long-term growth and competitiveness.

To establish EFSI, a guarantee of €16 billion will be created. The EU guarantee will be backed by a guarantee fund of €8 billion (half the amount) from the EU budget. The EIB will commit €5 billion, giving EFSI a risk absorbing capacity of €21 billion. EIB and European Commission experience indicates that 1 euro of subordinated debt catalyses 5 euro in total investment: € 1 in subordinated debt and on top of that 4 euro in senior debt. This means that € 1 of protection by the fund generates € 15 of private investment in the real economy that would not have happened otherwise. This 1:15 multiplier effect is a prudent average, based on historical experience from EU programmes and the EIB. For more information, see this factsheet.

3. What are the next steps for the Investment Plan? When will EFSI be operational?

On 28 May 2015, EU legislators reached a political agreement on the Regulation for a European Fund for Strategic Investments (EFSI). This is just four and a half months after the Commission adopted the legislative proposal on 13 January. Member States unanimously endorsed it on 10 March and the European Parliament voted in committee on 20 April. The European Parliament's plenary gave its final approval on 24 June, allowing EFSI to be operational by early autumn as planned.

The European Council conclusions of December 2014 invited the EIB to "start activities by using its own funds as of January 2015". The EIB has already announced several projects to be pre-financed (or "warehoused") in the context of the Investment Plan for Europe, in which it is the Commission's strategic partner.

On 22 July 2015 the Commission decided to extend the EU guarantee to the projects pre-financed by the EIB and European Investment Fund (EIF), and with EIB appointed the members of the Steering Board. Members of the Investment Committee should be in place by September 2015 following an open call for candidates. Also in September, the European Parliament will hold a hearing to approve the candidates for the position of Managing Director and deputy Managing Director of EFSI. The Commission plans to have the European Investment Advisory Hub (EIAH) up and running in autumn 2015, and the European Investment Project Portal (EIPP) by the end of 2015.

4. What is the European Investment Project Portal? Who runs it?

The European Investment Project Portal (EIPP) will improve investors' knowledge of existing and future projects all over Europe in an effort to increase transparency and maximise investor participation in financing (without any guarantee that these projects will be financed by public authorities).The project portal will enable EU-based project promoters that are seeking external financing to share their investment projects and ideas with potential investors. It will be managed by the European Commission and should be operational by the end of 2015.

5. What is the European Investment Advisory Hub? What support will it offer?

The European Investment Advisory Hub(EIAH) will provide a single access point to a wide range of advisory services in support of project identification, development and implementation, access to finance, the use of financial instruments, and capacity building. The Hub will enhance the capacity of public and private actors across the Union to structure financially sound projects in order to bring them to maturity. The Hub should be operational by autumn 2015.

6. What is EFSI's governance structure?

EFSI will have a Steering Board to provide general policy guidance, composed of three experts from the Commission and one expert from the EIB, and an Investment Committee to take individual investment decisions based on the general policy on whether to use the EU guarantee on EIB operations under EFSI. The Investment Committee will consist of eight members and will be chaired by the Managing Director of EFSI. The profiles for the members of the Investment Committee are set in the EFSI Regulation.

The Steering Board will propose a candidate for Managing Director and Deputy Managing Director of EFSI. The European Parliament will give its approval after holding a hearing. The President of the EIB will then formally appoint the Managing Director and Deputy Managing Director. Their terms are fixed for three years and can be renewed once.

7. How will EFSI's governance structure ensure independence from public and private contributors? What accountability measures will there be?

Members of the Investment Committee will be independent experts, with a high degree of market experience. This will ensure that there will be no political interference whatsoever in the selection of projects.

To ensure a high level of accountability, the Chairperson of the Steering Board and the Managing Director shall report on the performance of EFSI to the European Parliament or the Council at their request, including by participating in hearings.

The President of the EIB will also be accountable to the European Parliament on issues concerning EIB financing and investment operations under EFSI. He may be asked to participate in a hearing if the European Parliament has concerns on these issues.

8. What is the role of the EIB in the decision making?

As contributor to EFSI, the EIB will have representatives in the Steering Board. Since EFSI is operating within the EIB, any project supported by EFSI will also require approval according to the EIB’s regular procedures. EFSI financing for SMEs and mid-caps through the European Investment Fund (EIF) will equally require approval according to the EIF's regular procedures.

9. What is the role of the European Parliament and the Court of Auditors in the monitoring of EFSI?

The EFSI Regulation puts in place extensive rules to ensure that EFSI is accountable to the European Parliament. Monitoring is structured around two key principles:

(a) Reporting: The EIB will report (i) bi-annually to the Commission and (ii) annually to the European Parliament and the Council on the EIB financing and investment operations under the Regulation. The report will be made public. The Commission will also report to the European Parliament and the Council on the application of the Regulation.

(b) Accountability: The European Parliament will have the right to organise at any time hearings with the Chair of the Steering Board and the Managing Director of EFSI on the performance of the latter. The Chair of the Steering Board and the Managing Director will also have a legal obligation to reply swiftly – orally or in writing – to questions addressed by the European Parliament. The European Parliament and the Council can also request reporting by the Commission. The President of the EIB can be called to a hearing at the European Parliament and he must to reply swiftly – orally or in writing – to questions addressed by the European Parliament.

The Court of Auditors will apply its normal rules for auditing the EU guarantee and the payments and recoveries that are attributable to the general Budget of the Union. Its existing role as regards the auditing of the activity of the EIB (detailed in a tri-partite agreement between the EIB, the Court of Auditors and the Commission) remains unchanged. The EIB will provide a risk assessment to the Commission and the Court of Auditors annually on EIB and EIF EFSI financing operations.

10. How can Member States contribute to the Investment Plan?

EFSI is constructed in the most flexible way to allow Member States to participate. Member States, directly or via their National Promotional Banks, can contribute either at the level of the risk-bearing capacity (complementing the contributions from the EU budget and the EIB), through an investment platform or by directly co-financing certain projects and activities.

11. Will national contributions to the Investment Plan count as part of countries’ deficit or debt and will these be taken into account in the application of the Stability and Growth Pact?

The EFSI Regulation includes a declaration by the Commission regarding the treatment of Member State contributions under the Stability and Growth Pact. The treatment of investment platforms under the Stability and Growth Pact (SGP) depends in the first place on the statistical classification of such platforms by Eurostat. The statistical treatment, on or off the government's balance sheet, is governed by the same Eurostat rules as those pertaining to NPBs themselves. Investment platforms with legal personality could be treated as Special Purpose Entities (SPEs) for this purpose.

In general terms, SPEs are classified inside government if they are established by the government and serve a government unit. In the case of an investment platform with multiple shareholders or sponsors, the platform's status depends on the entity or entities controlling it according to national accounts rules. Should the NPB be classified inside government or their operations rerouted through government, the main issue becomes which is the entity setting up and controlling the SPE.

One-off contributions by Member States -either by the State or by National Promotional Banks classified in the general government sector or acting on behalf of the State - into EFSI thematic or multi-country investment platforms, should in principle qualify as one-off measures. If that is the case, the cost of such one-off measures would not be taken into account for the computation of structural deficit under the Stability and Growth Pact. They would still need to be registered in public accounts.

The declaration does not provide any change to the rules. It simply recalls the application of the existing rules. Obviously, this remains a case by case assessment by the Commission.

12. If a Member State contributes to the Investment Plan, will that money only go to projects in their own country?

No, contributions by Member States do not necessarily have to stay in their own country. For example, some National Promotional Banks may finance investments in other Member States. They may also set up co-investment platforms with neighbouring countries, and they may invest in cross-border projects.

13. How can National Promotional Banks contribute financial or human resources?

Concerning financial contributions, National Promotional Banks (NPBs) are welcome to contribute at the level of the Fund, in a co-investment platform or at project level. Regarding cooperation with the NPBs staff, there is already close coordination and expertise sharing between the EIB and National Promotional Banks. This will be further encouraged as NPBs can contribute to the Investment Plan's objectives and implementation with valuable expertise on the ground.

14. What are investment platforms? How do they work?

Scale matters when it comes to investment, so it makes sense for public or private project promotersto create thematic investment platforms (which are similar to Special Purpose Vehicles) so that projects can be pooled, for example in areas such as energy efficiency or broadband. This would allow EFSI and other parties to finance projects jointly. It will be technically easier and more efficient for EFSI to invest in a dedicated vehicle with great scale nationally or multi-nationally than to close smaller deals with individual investors.

Investment platforms can also be geographic: including regional, national or cross-border platforms. Certain projects, for example in the area of energy interconnectors, may require the collaboration and co-financing of several regions or countries. The rules for the organisation of these platforms are not prescriptive.

15. Can non-EU countries participate in the Investment Plan? How can they contribute?

In order to maximise the impact of EFSI, it is important that it is open to contributions by third parties, including entities outside the EU. Non-EU countries can co-invest in EFSI projects, either directly or via co-investment platforms. Subject to the agreement of the Steering Board, non-EU countries can also contribute with cash to EFSI, but this shall not give them the right to participate in the decision-making or voting by the Steering Board.

EFSI financing can flow to entities from non-EU countries, but only as part of cross-border projects involving EU countries. These would be countries falling within the scope of the European Neighborhood Policy including the Strategic Partnership, the Enlargement Policy, and the European Economic Area or the European Free Trade Association, or to an Overseas Country or Territory.

16. What type of projects will EFSI support?

Contacts with the private sector have shown that investors put particular emphasis on the robust quality and independent selection of projects that could be supported by the Investment Plan. Projects should be (1) economically viable with the support of the initiative, (2) sufficiently mature to be appraised on a global or local basis, (3) of European added value and consistent with EU policy priorities. (4) Last, they must maximize where possible private sector financing. Projects do not have to be cross-border.

The use of the EU guarantee will allow the EIB to go beyond its usual business and make riskier investments. That way the EIB can invest in riskier projects alongside the private sector, without risking its triple A-rating.

17. What criteria will be used to select projects? Which projects will be financed? Who will be responsible for deciding whether the projects meet the criteria?

Projects will not be chosen for political reasons. There are strict eligibility criteria and no country-specific or sector-specific quotas. This is critical in order to attract private investors to participate in EFSI. Any perception of public interference will deter private actors. The Investment Committee, made up of independent experts (outlined above), will decide whether specific projects can be supported by the EU guarantee based on the investment guidelines and a scoreboard of indicators.

Projects will be selected based on their "additionality" (i.e. that they could not be realized without the backing of the EU guarantee), economic viability, reliability and credibility and their contribution to key growth-enhancing areas in line with EU policies. These include education and knowledge, innovation and the digital economy; energy union; transport infrastructure; social infrastructure; and natural resources and the environment. They must also mobilise where possible private sector financing.

18. Who can apply for EFSI financing and how? Is there a minimum threshold?

The following can apply for EFSI financing: entities of all sizes, including utilities, special purpose vehicles or project companies; small and medium-sized enterprises (with up to 250 employees) and midcaps (with up to 3 000 employees); public sector entities (except the Member States themselves); National Promotional Banks or other banks to deliver intermediated lending; funds and any other form of collective investment vehicles; bespoke investment platforms.

There are generally two ways to apply for EFSI financing. First, any project promoter can contact the EIB directly and anytime with their proposal, following the usual application on the EIB website for the strategic investment window. Member States' governments are not gatekeepers in this process. Projects can be submitted at any time, this is a dynamic process. When the EIB receives a project proposal, it will analyse the proposal and decide whether it is suitable for EIB or EFSI financing (with the backing of the EU guarantee). Secondly, SMEs interested in EFSI transactions financed via the European Investment Fund (EIF) – the SME and Midcap window - can refer to information on EIF financial intermediaries on the EIF website.

19. How will EFSI intervene concretely on long-term investment projects, notably on projects which demand a large share of public investments (50% or more)?

This is often the case in the field of energy efficiency, infrastructure and digital agenda (e.g. broadband in remote areas) for projects to be viable. EFSI will - as a rule - provide the riskier tranche of the investment so as to maximise the contribution from private sources of financing by reducing the risk ("first loss protection"). Member States and National Promotional Banks can provide co-financing at the level of different projects. In this way they can ensure a higher level of public financing in a certain project. Depending on the sector and the area, some projects will generate higher returns than others. This is not problematic since EFSI will have a vast portfolio of different projects in different areas, ranging from transport to education, energy to innovation.

In addition, Member States can use Structural Funds to finance projects which need a high level of public participation and where it may be more difficult to attract private investors, given the more limited levels of return.

20. How will EFSI help SMEs?

EFSI will provide financing (using instruments such as equity, quasi-equity and others) for projects that are deemed high-risk, which is often missing in the current economic environment. This could be of benefit to small, innovative companies starting up, which investors tend to see as presenting higher risk than more established or larger companies. A quarter of the total investment catalysed by EFSI, or €75 billion over three years will go to SMEs and mid-caps via the European Investment Fund (EIF), which is part of the EIB group. SMEs normally receive finance via dedicated funds such as special purpose vehicles (SPVs), or intermediaries such as banks.

The EIF has already started co-financing SMEs: in May 2015 it signed a first agreement with a French bank to provide increased lending to innovative companies; followed by similar agreements with banks in other countries.

The SME Window of EFSI will support existing funding from the Competitiveness of Enterprises and Small and Medium-sized Enterprises ("COSME") programme and reinforce the implementation of the COSME Loan Guarantee Facility (LGF), which have seen a strong market demand but have limited budgetary resources. Thanks to a guarantee provided under EFSI the European Investment Fund (EIF) will be able to bring forward in time the signature of transactions with financial intermediaries compared to what would have been possible under the COSME budget alone. This will create multiple positive impacts, leading to further investments, growth and faster economic recovery.

21. What is the difference between the current EIB-financed projects and projects financed by EFSI? What is so-called "additionality"?

"Additionality" means that a project could not be realized without the backing of the EU guarantee and that other forms of financing were not available to the project due to its risk profile.

The activities of EFSI are additional to the EIB's traditional activities because they generally target a different risk profile. EFSI will for example get involved in cutting-edge new technology and innovation sectors, as well as finance projects that are perceived as riskier because of their country risk and due to risk-aversion from the private sector.

The EIF will continue to finance SMEs and mid-caps as it has always done, but EFSI will allow this to take place on a larger scale, to companies with riskier or more innovative profiles, and sooner than foreseen by the EIF.

22. How will the Commission ensure that a Fund depending essentially on private participation will invest in projects aiming to promote sustainable and environmentally-friendly economic growth?

The Fund will decide in which projects to invest according to the investment guidelines. The Investment Committee will decide on individual projects based on their merits. The viability criteria differ depending on the nature of the sector: renewable energy is clearly different from transport, which is different from education. Promotion of sustainable and environmentally friendly economic growth, and the creation of quality jobs, including in terms of competitiveness, are elements that are likely to be taken into account in this context, notably via the computation of a scoreboard used for the assessment of projects.

23. How will the Commission ensure that EFSI addresses macro-economic imbalances among EU Member States and, particularly, that the most vulnerable economies benefit from these investments?

Vulnerable economies present generally a higher level of risk for investors. By allowing the EIB to take more risks, EFSI will also facilitate investment in the regions most affected by the crisis.

Member States are encouraged to continue using the Structural Funds for regional and local projects contributing to social and economic cohesion. EFSI will not have funds ear-marked for certain sectors or regions. However, as mentioned, viability criteria will differ depending on the sector and societal return which will be taken into account in this context. In any event, EFSI will finance projects across the EU and technical assistance will be stepped up significantly to ensure that all countries can present well-constructed, viable and investible projects.

24. Will EFSI projects fall under state aid rules?

EFSI financing is not State aid within the meaning of the EU Treaties, and EFSI financing will not have to be approved by the European Commission under EU State aid rules. EFSI operations will address market failures or sub-optimal investment situations which could not, or not to the same extent, otherwise have been carried out, and projects supported by EFSI will typically have a higher risk profile than projects supported by EIB normal operations.

Projects supported by EFSI may however also benefit from financial support (co-financing) by EU Member States. Such co-financing is, unless granted on market terms, State aid which must be approved by the Commission.

The Commission has in the past two years fundamentally modernised its State aid rules. It updated the body of rules applying to key economic sectors like broadband, aviation or energy to ensure that taxpayer money is well spent on smart aid measures, which contribute to economic growth and do not harm fair competition. The Commission will assess EFSI projects with Member State co-funding on the basis of its modernised State aid framework.

To support EFSI, the Commission will assess Member State co-financing as a matter of priority, and give it fast-track treatment. The Commission aims to complete its assessment within six weeks of receiving the required information from the Member State. To support the fast-track process, the Commission will set up an internal task force, establish a dedicated working group for Member States to exchange best practices, and offer real-time advice to Member States on how to design projects in line with EU State aid rules.

The fast-track process responds to the exceptional need to bridge the current investment gap in the EU and the lack of risk-financing for economically viable projects, which EFSI seeks to address by mobilising private investment, and the specific form of financing they will provide.

EU State aid rules go hand in hand with the Investment Plan's objective of addressing market failures and mobilising private investment. They ensure that investment projects address real needs, keep costs under control and guarantee that public money is genuinely required to get the projects off the ground.

Out of the €16 billion which the EU offers as a guarantee, an EU guarantee fund of €8 billion (50% of the total value) will be put in place to mitigate any possible impact on the EU budget by potential calls on the EU guarantee. Its calibration has been chosen so that the EU can meet any potential risks with an adequate safety margin. The guarantee fund of €8 billion is established only to facilitate the payment of potential guarantee calls, since it avoids having to arrange sudden spending cuts or re-programming. Thus, it brings transparency and predictability to the budgetary framework but is not as such necessary for the guarantee to work.

To establish the EU guarantee fund, a total of €8 billion will be reallocated from the EU budget. Out of this amount, €5 billion will be reallocated from existing EU funding programmes (€2.2 billion from Horizon 2020 and €2.8 billion from the Connecting Europe Facility) and €3 billion will come from the margins of the EU budget.

26. Why is the Commission cutting the budgets of the Horizon 2020 and CEF programmes? Does the Commission not believe research is a priority?

Investing in research is - and will remain - a priority for the EU and the Investment Plan for Europe will be instrumental in supporting research-related projects across Europe. With the Investment Plan, the overall amount of investment in research and innovation mobilised by the EU budget in the coming years will be higher than with Horizon 2020 only.

The Commission's objective is to ensure that European innovations can be brought to the market by successful new companies using the right financial instruments. EFSI will finance riskier — and therefore more innovative — projects, which are usually the first step to creating new and bigger businesses driven by research.

The redeployment of €2.2 billion from Horizon 2020 represents only 2.9% of the Horizon 2020 financial envelope for 2014 to 2020. After this redeployment, the Horizon 2020 financial envelope remains 39% higher in current prices than that of the 7th Framework Programme 2007-2013 (26% in constant prices). Within Horizon 2020, the EU budget lines of the European Research Council, Marie Curie actions, and "Spreading Excellence and Widening Participation" will not contribute to the financing of EFSI.

27. Why is money taken from innovation but not from other policies like agriculture?

In 2013, after difficult negotiations, the EU adopted a €1 trillion multi-annual financial framework (MFF) for 2014-2020. The MFF is divided into headings (e.g. competitiveness, cohesion, agriculture, external action). A transfer of funds between headings requires a change to the MFF that can only be decided by unanimity among Member States. Such a change would necessitate a complex and time-consuming negotiation, the outcome of which would be uncertain.

In addition, as investing in riskier projects and companies is one of EFSI's priorities the funds redeployed will still support innovation but through different instruments.

28. How will this €8 billion be allocated over time?

The first contributions for EFSI will be made in 2015 and 2016. Then, the remaining budget allocations will be spread in the years to come. For example, draft budget 2016 foresees payments of €500 million and commitments of €2 billion for EFSI, of which €707 million from Horizon 2020 and €620 million from CEF and 703 million from the margins. The amounts were finalised in the special amending letter, prepared to bring draft budget 2016 in line with the agreement reached on 28 May 2015.

29. Do you need to amend the budget to be able to use the margins for 2015?

30. By providing the first-loss guarantee, might EFSI not be saddled with some loss making projects for decades? Will EFSI enable financing of projects that would be too risky for the EIB?

The EIB is a public bank whose activities are not guided towards making profit. The characteristics of what it can do are limited by the fact that it is a bank that needs to repay the funds which it uses to lend money and manage the risk of its portfolio. Having said that, EFSI will play the role of absorbing some of the risk so as to allow the bank to lend to additional projects with higher risk profiles.

The intention is that EFSI should not end up being the only financing source. The objective is that EFSI protects other investors against the first loss, making investments more attractive for these investors. Projects will only be selected if - with EFSI's involvement – an appropriate multiplier effect can be achieved in terms of attracting private investors and if the projects are viable. Obviously, some projects will generate higher returns than others.

The extension of the guarantee to a project will be approved by an independent board of experts – the Investment Committee – based on their quality. There may be losses in certain projects, but the overall Fund performance shall provide long-term returns to public and private investors and thus, positive returns on taxpayer's money.

31. Why do loans, equity and guarantees have a greater leverage effect than grants?

The extra leverage is generated by the EIB borrowing against the money, rather than the money going directly to the end-recipient. The €21 billion from EFSI allows the EIB to borrow around three times as much, and then invest in/finance the final recipient, rather than the €21 billion being given directly as grants.

This is a smart use of public money to help channel private money into investments. To establish EFSI, a guarantee of €16 billion will be created under the EU budget. This money will provide a risk bearing capacity to the EIB. The Guarantee, coupled with EIB-resources of €5 billion, will absorb the higher risk in strategic investments and in this way mobilise private resources that are currently not being invested in the real economy. The Fund will thus start with a significant firepower while being able to expand its activities further over time. The Commission and the EIB have identified a leverage ratio of 1:15 as sound and feasible. The EIB has vast experience in this area.

In addition, and on top of the €315 billion mobilised by EFSI, European Structural and Investment Funds need to be deployed in a more efficient way which will multiply the effect of the Fund. And finally, Member States and private investors can participate at platform or project level.

33. Money will go to relatively safe projects that would have been financed anyway. Isn't the Investment Plan crowding out private investors?

EFSI targets higher risk projects than the private sector would finance on its own without the EU guarantee. It contributes to financing projects that could not be financed solely by the public or private sectors. It is not the objective of EFSI to finance projects that could get access to finance in the private sector, national level or other EU schemes. EFSI will only finance on average 20% of the total investment, leaving 80% to other financing sources.

34. The 1:15 multiplier effect is considered by the Commission and the EIB as "a prudent average, based on historical experience from EU and EIB programmes". What is the concrete experience you are referring to?

As representatives of the EIB have said on several occasions, the multiplier effect is considered to be "conservative", based on the EIB experience. The risk-department of the EIB has a long track-record of lending activities in different sectors. By way of example, the EIB capital-increase from 2012-13 is generating a multiplier effect of 1:18. On the Commission side, experience from the CIP-SMEG programme (SME-financing), suggests a multiplier effect of approximately 1:30.

35. What is the concrete data available? Is this historical experience relevant to the current situation with squeezed national budgets?

The multiplier effect is an estimated average and there is no direct link to national budget situations. An important element of the multiplier factor is the crowding-in of private investors. By contrast to some years ago, today there is a high level of liquidity in Europe, meaning that private investors have available liquidity which they can mobilise for investments.

36. What kind of financial vehicles will EFSI's activities rely on to attract private/public investors in the financing of a project?

EFSI will work with a wide range of financial instruments and will be flexible in terms of which instrument to use, depending on the project in question, to ensure the most efficient financing solutions. EFSI can for example use debt instruments, guarantees, equity, quasi-equity instruments, credit enhancement tools or venture capital. It will be able to finance projects directly or participate in funds that finance various projects.

37. How long will EFSI be operational? What is the lifetime of the Fund?

EFSI has an initial investment period of four years. After three years it will be subject to an independent evaluation. The Commission will publish a report assessing its EU-wide impact on investment, job creation and access to financing for SMEs and mid-caps. Based on this report, the Commission will propose to the co-legislators to set a new investment period with an appropriate financing if:

the report concludes that EFSI is achieving its objectives and that maintaining a scheme for supporting investment is warranted; or

the report concludes that EFSI is not achieving its objectives, but that maintaining a scheme for supporting investment is nonetheless warranted. In this case, the Commission would adopt a proposal amending EFSI in order to address the flaws identified.

38. Many investment horizons are longer than the lifetime of EFSI. How will this be managed?

The projects implemented under EFSI support are EIB and EIF projects and will be monitored by them irrespective of the duration of the investment period.

39. Can the debt and risk financing instruments in EFSI be combined with structural funds?

Structural funds can be used by Member States to invest alongside EFSI in eligible projects. Member States and regional authorities are also invited to use EU funds at their disposal as effectively as possible in support of investment, by focusing on key areas and maximising the multiplier effect of every euro invested. This implies an increased use of financial instruments in the form of loans, equity and guarantees, instead of traditional grants.

In the context of the Investment Plan, the ambition is to at least double the use of innovative financial instruments in the European Structural and Investment Funds from 2014 to 2020. The increased use of innovative financial instruments, rather than grants, should create additional impact of every euro mobilised.

By doubling the amount of innovative instruments and using the multiplier effect, at least €20 billion in terms of additional investments in the real economy through structural funds could be mobilised between 2015 and 2017.

Member States are invited to use EU funds still available under the 2007 to 2013 programming period to their best effect and ensure that they are fully used in support of this Investment Plan.

40. Isn't there an overlap between EFSI and the European Structural and Investment Funds (ESIF)?

No. EFSI regulation aims at full complementarity between EFSI risk financing opportunities and those of the European Structural and Investment Funds.

Both sources have different purposes and are implemented with different financial instruments. While EFSI focuses on attracting private investors in economically viable projects, the bulk of the European Structural and Investment Funds (ESIF) consist of grants.

The Commission is working on concrete guidance to managing authorities on how to better combine these opportunities. In addition, Member States are encouraged to at least double the use of innovative financial instruments to optimise the impact of structural funds in the future.

To take a fictitious example: building a road with a toll in an industrial centre might attract investors and could thus be more easily funded through EFSI. But building a road without toll in a rural area will probably not attract private investors and is therefore better funded through the European Structural and Investment Funds (ESIF).